Diamonds That Were Never Bought: SEC Sues Lugano Founder Over Alleged Investment Scheme and $1 Billion in Fictitious Revenue

Published Oct. 12, 2026. Case statuses are current as of that date. This article is based only on documents published by the U.S. Securities and Exchange Commission.

The offer was exclusive: invest in a specific high-end diamond, and a celebrated jeweler would use his expertise to make it more valuable, find a buyer or turn it into a finished piece. According to the Securities and Exchange Commission, the jeweler never owned the diamonds and never took steps to buy them.

On Aug. 31, 2026, the SEC sued Mordechai Haim Ferder, founder and former CEO of Lugano Diamonds & Jewelry, Inc., and Simba IL Holdings LLC, an entity the SEC says Ferder controlled, in federal court in California [1][2].

Important: These are civil allegations. The SEC's release does not report a settlement, and Ferder and Simba have not been found liable. The release does not mention criminal charges.

The alleged investment scheme

According to the SEC [1][2], from 2021 to 2025 Ferder persuaded individuals to invest hundreds of millions of dollars in diamonds that neither he nor Lugano owned. The SEC alleges he falsely told investors that:

• he or Lugano would acquire the diamond tied to each investment contract;
• he would find a buyer for that diamond; and
• he would create jewelry from it or otherwise try to raise its value.

In reality, the SEC says, Ferder and Lugano neither bought the diamonds nor did anything to increase their value. Instead, the SEC alleges, investors were paid with Ponzi-like payments.

From investor money to "revenue"

The case is also an accounting case, because Lugano was owned by a public company. In September 2021, Compass Diversified Holdings ("CODI"), a publicly traded company, bought a majority interest in Lugano's predecessor. According to the complaint, Ferder's side received nearly $104 million and kept a 40% stake, most of the money going to Simba, and Ferder became CEO of Lugano [2].

The SEC alleges Ferder then directed Lugano to book investor money as revenue rather than debt, record entirely fictitious revenue using fabricated invoices and entries, and disguise repayments to investors as inventory purchases. The result, the SEC says, was more than $1 billion of fictitious revenue recognized by Lugano and CODI [1][2]. The complaint says Lugano's reported sales almost quadrupled after the acquisition and that by the end of 2024 Lugano made up 21% of CODI's revenue and 58% of its income [2].

According to the complaint, Ferder also misled CODI's outside auditor, lied to CODI and its internal auditors, misappropriated corporate assets, and gave Lugano's allegedly sham financials to prospective buyers when CODI explored selling Lugano in 2024 [2].

After the conduct was discovered in 2025, the SEC says, CODI restated its financials, cutting the value of Lugano's net identifiable assets at acquisition from $179 million to $5 million and erasing more than 85% of the Lugano revenue it had reported after the acquisition [1]. The SEC's release does not allege wrongdoing by CODI.

The charges

The complaint charges Ferder with violating antifraud provisions of the Securities Act and Exchange Act and books-and-records and internal-controls provisions, and charges Simba with antifraud violations. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties, and an officer-and-director bar against Ferder. Ferder and his wife are also named as relief defendants, in their capacities as trustees of three family trusts that the SEC alleges received fraud proceeds; relief defendants are not accused of wrongdoing [1]. The SEC says its investigation is continuing.

The case is SEC v. Ferder, et al., No. 8:26-cv-02492, U.S. District Court for the Central District of California [1].

What happens next

This is a civil case brought by the Securities and Exchange Commission, not a criminal prosecution. The SEC cannot send anyone to prison; it asks a federal judge for orders such as injunctions, repayment of allegedly ill-gotten gains (called disgorgement), interest on that money, civil penalties and industry bars.

A complaint is a set of allegations. The defendants have not been found liable, and they will have the chance to respond in court. Civil cases like this one can end in a settlement, a judgment after motions or trial, or a dismissal. We will update this article as the case develops.

Red flags to watch for

• Investments in a specific gem, coin or collectible that stays in the seller's hands.
• No proof of purchase or title, such as an independent grading certificate, invoice from the supplier, or vault receipt in your name.
• Returns that depend on the seller's "expertise" to raise the item's value or find a buyer.
• Payouts arriving on schedule with no evidence any item was sold.

What to do if you invested

1. Keep every record: account statements, promissory notes, subscription agreements, emails, texts, wire confirmations and screenshots of websites or videos.
2. Report it to the SEC at sec.gov/tcr.
3. Check who you are dealing with. Before investing, search the person and firm on the SEC's Investor.gov adviser search and FINRA's BrokerCheck.
4. Beware of "recovery" offers. People who lost money in investment frauds are often contacted by scammers who promise to recover it for an upfront fee. Government agencies and court-appointed receivers do not charge victims to file claims.

Case status (as of Oct. 12, 2026)

Defendant	Court	Status as of Oct. 12, 2026	Source
Mordechai Haim Ferder	U.S. District Court, C.D. Cal. (No. 8:26-cv-02492)	Sued by SEC Aug. 31, 2026 (civil fraud); no settlement reported; not found liable	[1], [2]
Simba IL Holdings LLC	Same	Sued by SEC Aug. 31, 2026; no settlement reported	[1], [2]

Statuses can change. An SEC complaint contains allegations, and a settlement without admitting or denying them is not a finding of wrongdoing.

Sources

1. U.S. Securities and Exchange Commission, Litigation Release No. 26625, "SEC Charges Former CEO of Lugano Diamonds in Alleged Massive Accounting and Offering Fraud," Sept. 1, 2026. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26625
2. SEC complaint, SEC v. Ferder, et al., No. 8:26-cv-02492 (C.D. Cal. filed Aug. 31, 2026). https://www.sec.gov/files/litigation/complaints/2026/comp26625.pdf

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Corrections and updates: If you are named in this article, or represent someone who is, and believe anything here is inaccurate or out of date (including a dismissal, a court ruling on a proposed judgment, or any other change in case status), please contact us at editorandchief@scammers.com. We will review it and update the article promptly.